Reservoir costs set to triple to up to £7.5bn

Thames Water previously estimated the project would cost £2.2bn - but now says it is expecting a final price tag of between £5.5bn and £7.5bn

The expected cost of a new reservoir looks set to triple to as much as £7.5bn.

Thames Water's South East Strategic Reservoir Option (SESRO) near Abingdon in Oxfordshire was previously costed at £2.2bn.

The company is now predicting the final price tag will range between £5.5bn and £7.5bn and the revised budget was published in updated plans.

Thames Water said the increased estimates for the site, that will cover an area the size of Gatwick Airport, were down to changes to the design, "rapid inflation" and a rise in contracting costs.

Customers of Thames Water, Affinity Water and Southern Water will pay for the new reservoir through their bills.

Thames Water's Strategic Water Resources Director, Nevil Muncaster, said about £5 a month would be added to bills by 2040.

He added: "There's a lot of things that can change that.

"That is around the final design, when we contract out the work - the price we get from contractors - and obviously market conditions for the return on financing costs for the scheme too."

Mr Muncaster said Thames Water was continuing with the scheme, despite the rising costs.

"We're doing more work on both this scheme, but the other alternatives as well - which we'll be publishing a report later in the autumn on that," he said.

"But at the moment from the analysis we've done, it still represents the best value proposal and really providing that security of supply for the whole of the South East of England."

Thames Water says the reservoir will secure supply for 15-million people.

The company has published the updated cost in its "Gate Three report", which has been put together ahead of a planning application expected to go in next year.

The report will be reviewed by RAPID - a joint regulatory body made up of OFWAT, the Environment Agency and the Drinking Water Inspectorate.